COUNTY OF CALDWELL NORTH CAROLINA

Transcription

1 COUNTY OF CALDWELL NORTH CAROLINA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2016

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3 Comprehensive Annual Financial Report For the Year Ended June 30, 2016 Prepared by Finance Department

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5 COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2016 TABLE OF CONTENTS Exhibit Page Introductory Section: Letter of Transmittal GFOA Certificate of Achievement for Excellence in Financial Reporting Organizational Chart List of Principal Officials i-v vi vii viii Financial Section: Independent Auditor's Report 1-3 Management's Discussion and Analysis 4-12 Basic Financial Statements: Government-Wide Financial Statements: A Statement of Net Position 13 B Statement of Activities Fund Financial Statements: C Balance Sheet - Governmental Funds 16 D E F Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 17 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds to the Statement of Activities 18 General Fund - Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual G Statement of Net Position - Proprietary Fund 21 H Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Fund 22

6 COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2016 TABLE OF CONTENTS Exhibit Page I Statement of Cash Flows - Proprietary Fund 23 J Statement of Fiduciary Net Position - Fiduciary Fund 24 Notes to the Financial Statements Schedule Required Supplemental Financial Data: A-1 Law Enforcement Officers' Special Separation Allowance - Required Supplementary Information 68 A-2 Other Post-Employment Benefits - Required Supplementary Information 69 A-3 Local Government Employees' Retirement System Proportionate Share of Net Pension Liability (Asset) Required Supplementary Information - Last Three Fiscal Years 70 A-4 Local Government Employees' Retirement System Contributions Required Supplementary Information - Last Three Fiscal Years 71 A-5 Register of Deeds' Supplemental Pension Fund Proportionate Share of Net Pension Liability (Asset) Required Supplementary Information - Last Three Fiscal Years 72 A-6 Register of Deeds' Supplemental Pension Fund Contributions Required Supplementary Information - Last Three Fiscal Years 73 Supplementary Information: Major Funds: B-1 General Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual B-2 Public Schools Capital Project Fund - Major Fund Schedule of Revenues and Expenditures - Budget and Actual 86

7 COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2016 TABLE OF CONTENTS Schedule Page Supplementary Information: Major Funds (continued): B-3 Sales Tax Reinvestment Fund - Major Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual 87 Nonmajor Governmental Funds: C-1 Combining Balance Sheet 88 C-2 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 89 Nonmajor Special Revenue Funds: D-1 Combining Balance Sheet 90 D-2 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 91 D-3 Fire District Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual 92 D-4 Rescue Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual 93 D-5 Emergency Telephone System Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual 94 Nonmajor Capital Project Funds: E-1 Combining Balance Sheet 95 E-2 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 96 E-3 Schools Capital Project Fund - Sales Tax Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual 97

8 Schedule CALDWELL COUNTY, NORTH CAROLINA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2016 TABLE OF CONTENTS Nonmajor Capital Project Funds (continued): E-4 General Capital Project Fund - Schedule of Revenues and Expenditures - Budget and Actual 98 Page Enterprise Fund: F-1 Water Fund - Schedule of Revenues and Expenditures - Budget and Actual (Non-GAAP) F-2 Water Tanks Capital Project Fund - Schedule of Revenues and Expenditures - Budget and Actual (Non-GAAP) 101 Agency Funds: G-1 Combining Statement of Changes in Assets and Liabilities 102 Other Schedules: H-1 General Fund - Schedule of Ad Valorem Taxes Receivable 103 H-2 Analysis of Current Tax Levy - County-Wide Levy I-1 Emergency Telephone System Fund Unspent Balance - PSAP Reconciliation 106 Table Statistical Section: 1 Net Position by Component, For the Last Ten Fiscal Years Changes in Net Position, Last Ten Fiscal Years Fund Balances, Governmental Funds, Last Ten Fiscal Years Changes in Fund Balances, Governmental Funds, Last Ten Fiscal Years 111

9 COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2016 TABLE OF CONTENTS Table Page Statistical Section (continued): 5 Assessed Value of Taxable Property, Last Ten Fiscal Years Property Tax Rate, Direct and Overlapping Governments, Last Ten Fiscal Years Principal Property Tax Payers, Current Year and Nine Years Ago Property Tax Levies and Collections, Last Ten Fiscal Years Ratios of Outstanding Debt by Type Last Ten Fiscal Years Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years Direct and Overlapping Governmental Activities Debt As of June 30, Legal Debt Margin Information Last Ten Fiscal Years Demographic and Economic Statistics Principal Employers, Current Year and Ten Years Ago Full-Time Equivalent County Government Employees by Function Operating Indicators by Function Capital Assets Statistics by Function Miscellaneous Information 126

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11 INTRODUCTORY SECTION

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13 CALDWELL COUNTY P. O. BOX 2200 LENOIR NC LETTER OF TRANSMITTAL November 18, 2016 The Board of Commissioners County of Caldwell Lenoir, North Carolina State law requires that all general-purpose local governments publish a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of Caldwell County for the fiscal year ended June 30, This report consists of management s representations concerning the finances of Caldwell County. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of Caldwell County has established a comprehensive internal control framework that is designed both to protect the government s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of Caldwell County s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, Caldwell County s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. Caldwell County s financial statements have been audited by Martin Starnes & Associates, CPA s, PA, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of Caldwell County for the fiscal year ended June 30, 2016, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an

14 unmodified opinion that Caldwell County s financial statements for the fiscal year ended June 30, 2016, are fairly presented in conformity with GAAP. The independent auditor s report is presented as the first component of the financial section of this report. The independent audit of the financial statements of Caldwell County was a part of a broader, federally mandated Single Audit designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in Caldwell County s Single Audit Report. GAAP require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. Caldwell County s MD&A can be found immediately following the report of the independent auditors. Description of the County Caldwell County is located in scenic western North Carolina, approximately 70 miles northwest of Charlotte, 85 miles southwest of Winston-Salem and 90 miles northeast of Asheville. The altitude of the County ranges from 900 to 5,964 feet above sea level with topography ranging from rolling foothills to high-forested mountains. It has a land area of 471 square miles and an estimated population of 79,594. There are ten incorporated municipalities in Caldwell County. The City of Lenoir and the towns of Cajah s Mountain, Gamewell, Granite Falls, Hudson, Sawmills, and the Village of Cedar Rock are entirely within the County and the City of Hickory and the towns of Blowing Rock and Rhodhiss are partially within the County. The City of Lenoir is the largest municipality and serves as the county seat. Caldwell County, carved from the counties of Burke and Wilkes, was actually formed in January 1841, several weeks after the bill was introduced in the legislature. The bill to establish the county was rejected in 1839 because a faction within the state legislature wished to form two Democratic counties instead of one Whig county. The bill was reintroduced by Representative Elisha P. Miller on November 19, The bill of 1840 proposed to establish a county from Burke and Wilkes to be named Boone. It was first read and rejected on December 5, It was read a second time and passed by the casting vote of the Speaker, Robert B. Gilliam on December 14, There was some confusion over the selection of the name, however, but when Charles Manley, Clerk of the House, suggested to Representative Miller that the county be named for Dr. Joseph Caldwell, former President of the University of North Carolina and ii

15 advocator of a public school system and a railroad system stretching from Morehead City through the questioned county to Tennessee, the bill was ratified and signed on January 11, The County utilizes the commission/manager form of government. The five-member Board of Commissioners is elected at large on a partisan basis for staggered four-year terms of office. The Board represents the citizens by setting policy and a County manager hired by the Board administers the day-to-day business of government and carries out the policies of the Board. The County provides its citizens with a wide range of services that include law enforcement, emergency medical services, register of deeds, water, animal control, upkeep of the courthouse and other public buildings, solid waste disposal, public libraries, cultural and recreational activities, health services, social services, general administration and others. This report includes all the County s activities in maintaining these services. The County also provides financial support to certain boards, agencies and commissions to assist their efforts in serving citizens. Among these are the Caldwell County Board of Education, Caldwell Community College, the Caldwell County Economic Development Commission, Foothills Area Programs, and the Western Piedmont Council of Governments. Economic Conditions and Outlook The county continues to deal with continued adverse economic conditions related to the great recession and the slow recovery. The county also continues to feel the impact of losing thousands of manufacturing jobs. In an effort to boost the local economy the county has aggressively pursued economic development. A key tool used in this effort is a pool of funds contributed by the municipalities in the county that is used to offer economic development incentives. These incentives typically total $2,000 for each new job created or moved to Caldwell County and maintained for at least one year. Many companies have expressed interest in these incentives and have pledged to bring thousands of new jobs to the county. Financial Information The North Carolina Local Government Budget and Fiscal Control Act requires that all money expended by a unit of local government be budgeted. Because of this requirement, the budget is an integral part of a city or county s accounting system and daily operations. The annual budget, together with the various project budgets, forms an operating plan in addition to setting spending limits. For Caldwell County, annual budgets are adopted for the General Fund, some Special Revenue Funds, and Enterprise Operating Fund. Multiyear project budgets are adopted for some Special Revenue Funds, Capital Project Funds and Enterprise Capital Project Funds. Appropriations in the General Fund are made at the department level, and Enterprise and Special Revenue appropriations are made at the fund level. Capital Project appropriations are made at the iii

16 object level. For internal accounting purposes, budgetary control is maintained at the line item account level. Purchase orders within any line item are not issued until additional appropriations are made available through budget amendments or transfers. County department heads may make transfers of appropriations within a fund as long as total fund appropriations are not changed. The Board of Commissioners must approve budget amendments that change total fund appropriations or transfer appropriations between funds. Encumbrances outstanding at June 30, 2016, have been reported as reservations of fund balance. Financial Policies The county s financial policy for the fiscal year covered in this report focused on maximizing revenues and minimizing expenditures. The county has made every effort to spend only when absolutely necessary and to maximize other controllable revenue sources. The county has been able to reduce its outstanding debt over the past few years. Long Term Financial Planning The county continues to monitor its existing debt and look for savings opportunities. No new borrowings are scheduled to take place in the near future. There are continued preliminary discussions regarding a significant renovation to or replacement of Granite Falls Middle School. Other Information North Carolina state law (G.S ) requires the county to have an annual independent financial audit. A compliance audit of federal and state financial assistance programs is also required under the federal Single Audit Act of 1984 and the State Single Audit Implementation Act. The firm of Martin Starnes & Associates, CPA s, PA, performed both of these audits. The audit contract was awarded to this firm based on their qualifications. The auditor s report on the Basic Financial Statements is included in the Financial Section of this report. Caldwell County intends to submit this report to the Governmental Finance Officers Association (GFOA) for its Certificate of Achievement for Excellence in Financial Reporting program. This program recognized governmental units that publish easily read and efficiently organized Comprehensive Annual Financial Reports that conform to program standards. A Certificate of Achievement is the highest form of recognition awarded in the field of governmental financial reporting. Preparation of this report would not have been possible without the dedicated efforts of the entire staff of the Finance Department and support from the Caldwell County Board of Commissioners. iv

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20 Principal Officials June 30, 2016 Board of Commissioners Randy T. Church, Chairman Jeff Branch, Vice Chairman Clay Bollinger, Commissioner Mike LaBrose, Commissioner Donnie Potter, Commissioner Other County Officials Stan Kiser, County Manager Kathy Myers, Clerk to the Board Alan C. Jones, Sheriff Wayne Rash, Register of Deeds Will Wakefield, DSS Director Denise Michaud, Health Director Monty Woods, Tax Administrator Jimmy Harrison, Human Resources Director Susan Clark, Library Director (Int) Tony Helton, Finance Officer Sandra Rich, Director of Elections Barry Calloway, Facilities Supervisor Robin Soots, Central Permitting Supervisor Shelley Stevens, Planning Director Kathy Hutchings, Veterans Services Director Dino Dibernardi, Emergency Services Director Kevin Brown, Fire Marshal Kenneth Teague, Emergency Management Director Lucas Bentley, Information Technology Director Seth Nagy, Cooperative Extension Director viii

21 FINANCIAL SECTION

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23 INDEPENDENT AUDITOR S REPORT To the Board of Commissioners Caldwell County Lenoir, North Carolina Report On the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of Caldwell County, North Carolina, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the County s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Caldwell Railroad Commission. Those statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Caldwell Railroad Commission is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free from material misstatement. The financial statements of the Caldwell Railroad Commission were not audited in accordance with Government Auditing Standards. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation th Avenue Drive SE Hickory, North Carolina Phone Fax South Center Street Taylorsville, North Carolina Phone Fax Toll Free Both Locations Website:

24 and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, based upon our report and the report of the other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of Caldwell County, North Carolina, as of June 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund and the Sales Tax Reinvestment Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management s Discussion and Analysis, the Law Enforcement Officers Special Separation Allowance Schedule of Funding Progress, the Other Post-Employment Benefits Schedules of Funding Progress and Employer Contributions, the Local Governmental Employees Retirement System Schedules of the County s Proportionate Share of Net Pension Asset (Liability) and County Contributions, and the Register of Deeds Supplemental Pension Fund Schedule of the County s Proportionate Share of the Net Pension Asset and Schedule of County Contributions be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economical, or historical context. We and the other auditors have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information, because the limited procedures do not provide us with sufficient evidence to express an opinion or provide assurance. Supplementary and Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Caldwell County, North Carolina s, basic financial statements. The combining and individual nonmajor fund financial statements, budgetary schedules, other schedules, and other information, such as the introductory section and statistical section, are presented for purposes of additional analysis and are not a required part of the basic financial statements. 2

25 The combining and individual nonmajor fund financial statements, budgetary schedules, and other schedules are the responsibility of management, and were derived from, and relate directly to, the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America by us and the other auditors. In our opinion, based on our audit, the procedures performed as described above, and the report of the other auditors, the combining and individual nonmajor fund financial statements, budgetary schedules, and other schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements; and accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 18, 2016 on our consideration of Caldwell County s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Caldwell County s internal control over financial reporting and compliance. Martin Starnes & Associates, CPAs, P.A. Hickory, North Carolina November 18,

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27 Management s Discussion and Analysis As management of Caldwell County, we offer readers of Caldwell County s financial statements this narrative overview and analysis of financial activities of Caldwell County for the fiscal year ended June 30, We encourage readers to consider the information presented in conjunction with additional information that we have furnished in the financial statements, which follow this narrative. Financial Highlights The assets and deferred outflows of resources of Caldwell County exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $22,791,147 (net position). The government s total net position increased by $677,819, due to increased net position in the governmental activities. As of the close of the current fiscal year, Caldwell County s governmental funds reported combined ending fund balances of $19,959,436. At the end of the current fiscal year, unassigned fund balance for the General Fund was $3,498,350. The total fund balance in the General Fund decreased by $2,160,564 as a result of activities that took place during the fiscal year ended June 30, The General Fund expenditures concluded the year within budget. The County successfully complied with all State and federal service mandates as prescribed by law. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to Caldwell County s basic financial statements. Caldwell County s basic financial statements comprise three components: 1) governmentwide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-Wide Financial Statements. The government-wide financial statements are designed to provide readers with a broad overview of Caldwell County s finances in a manner similar to privatesector business. The Statement of Net Position presents information on all of Caldwell County s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of Caldwell County is improving or deteriorating. The Statement of Activities presents information showing how the government s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned and unused vacation leave). 4

28 Both of the government-wide financial statements distinguish functions of Caldwell County that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of Caldwell County include general government, public safety, economic and physical development, environmental, and culture and recreation. The business-type activities of Caldwell County include a water operation. The government-wide financial statements include not only Caldwell County itself (known as the primary government), but also a legally separate transportation system and a legally separate economic development commission for which Caldwell County is financially accountable. Financial information for these component units is reported separately from the financial information presented for the primary government itself. The government-wide financial statements can be found on Exhibits A and B of this report. Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. Caldwell County, like other State and local governments, used fund accounting to ensure and demonstrate compliance with financerelated legal requirements. All of the funds of Caldwell County can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both the governmental fund Balance Sheet and the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Caldwell County maintains nine individual governmental funds. Information is presented separately in the governmental fund Balance Sheet and in the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances for the General Fund and the General Capital Projects Fund, which are considered to be major funds. Data from the other seven governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. Caldwell County adopts an annual appropriated budget for its General Fund. A budgetary comparison statement has been provided for the General Fund to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on Exhibits C to F of this report. 5

29 Proprietary Funds. Caldwell County maintains one type of proprietary fund. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. Caldwell County uses enterprise funds to account for its water operations. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The propriety fund financial statements provide separate information for water operations, which is considered to be a major fund of Caldwell County. The basic proprietary fund financial statements can be found on Exhibits G to I of this report. Fiduciary Funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements, because the resources of those funds are not available to support Caldwell County s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statement can be found on Exhibit J of this report. Notes to the Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 25 through 67 of this report. Other Information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning Caldwell County s progress in funding its obligation to provide pension benefits to its employees. Required supplementary information can be found on pages of this report. The combining statements referred to earlier in connection with nonmajor governmental funds are presented immediately following the required supplementary information on pensions. Combining and individual fund statements and schedules can be found on Schedules B-1 through G-1 of this report. Government-Wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government s financial position. In the case of Caldwell County, assets and deferred outflows of resources exceed liabilities and deferred inflows of resources by $22,791,147 at the close of the most recent fiscal year. The largest portion of Caldwell County s net position reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment), less any related debt used to acquire those assets that are still outstanding. Caldwell County used these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although Caldwell County s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. 6

30 Table 1 Condensed Statements of Net Position Governmental Activities Business-Type Activities Total Primary Government June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015 Assets: Current and other assets $ 25,475,560 $ 31,404,023 $ 7,094,869 $ 6,907,167 $ 32,570,429 $ 38,311,190 Capital assets 33,943,080 33,524,393 5,631,176 5,928,124 39,574,256 39,452,517 Total assets 59,418,640 64,928,416 12,726,045 12,835,291 72,144,685 77,763,707 Deferred Outflows of Resources 1,463,811 1,434,784 29,419 29,131 1,493,230 1,463,915 Liabilities: Current liabilities 8,183,048 6,801, , ,537 8,545,732 7,147,298 Long-term liabilities 41,426,430 44,936,420 38,962 6,451 41,465,392 44,942,871 Total liabilities 49,609,478 51,738, , ,988 50,011,124 52,090,169 Deferred Inflows of Resources 819,122 4,923,910 16, , ,644 5,024,125 Net Position: Net investment in capital assets 20,245,509 18,060,668 5,631,176 5,928,124 25,876,685 23,988,792 Restricted net position 6,179,122 7,168, ,179,122 7,168,909 Unrestricted net position (15,970,780) (15,528,468) 6,706,120 6,484,095 (9,264,660) (9,044,373) Total net position $ 10,453,851 $ 9,701,109 $ 12,337,296 $ 12,412,219 $ 22,791,147 $ 22,113,328 The government s net position increased by $677,819 during the current fiscal year. The County continued construction on a new middle school during the fiscal year. Per North Carolina State law, the asset that is being constructed is not shown on the County s records as an asset. Rather, it is reported as an asset in the records for the public school system. For that reason, any funds spent on the new school will show as a decrease in the government s net position. During the fiscal year, the County spent over $1.7 million on the new school. Without this, the County s net position would have increased by roughly $2.4 million. The primary reason for this is the continued pay down of outstanding debt. The County did not issue any new debt during fiscal year

31 Table 2 Condensed Statement of Revenues, Expenses, and Changes in Net Position Governmental Activities Business-Type Activities Total Primary Government June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015 Revenues: Program revenues: Charges for services $ 7,677,876 $ 7,689,627 $ 3,545,293 $ 3,532,780 $ 11,223,169 $ 11,222,407 Operating grants and contributions 18,544,951 16,299, ,544,951 16,299,578 Capital grants and contributions 1,411, , ,411, ,466 General revenues: Property taxes 43,443,559 42,083, ,443,559 42,083,076 Local option sales tax 10,545,869 10,399, ,545,869 10,399,692 Other taxes and licenses 969,058 1,124, ,058 1,124,511 Investment earnings 13,665 10,675 3,357 2,003 17,022 12,678 Total revenues 82,606,623 78,146,625 3,548,650 3,534,783 86,155,273 81,681,408 Expenses: Governmental activities: General government 6,845,366 6,211, ,845,366 6,211,896 Public safety 20,638,553 19,274, ,638,553 19,274,686 Environmental protection 509, , , ,373 Economic and physical development 7,639,737 6,951, ,639,737 6,951,531 Human services 22,248,546 21,860, ,248,546 21,860,299 Cultural and recreational 1,441,711 1,366, ,441,711 1,366,650 Education 21,413,329 31,447, ,413,329 31,447,698 Interest 1,117,397 1,829, ,117,397 1,829,765 Business-type activities: Water Fund - - 3,623,573 3,072,617 3,623,573 3,072,617 Total expenses 81,853,881 89,310,898 3,623,573 3,072,617 85,477,454 92,383,515 Change in net position 752,742 (11,164,273) (74,923) 462, ,819 (10,702,107) Net Position: Beginning net position 9,701,109 23,442,054 12,412,219 12,005,735 22,113,328 35,447,789 Restatement - (2,576,672) - (55,682) - (2,632,354) Beginning net position, restated 9,701,109 20,865,382 12,412,219 11,950,053 22,113,328 32,815,435 Ending net position $ 10,453,851 $ 9,701,109 $ 12,337,296 $ 12,412,219 $ 22,791,147 $ 22,113,328 8

32 Governmental Activities. Governmental activities increased Caldwell County s net position by $752,742. This is a function of paying off outstanding debt while not issuing any new debt combined with additional spending on the new middle school. Business-Type Activities. Business-type activities decreased Caldwell County s net position by $74,923. The key elements in this decrease are as follows: Business-type activities reduced the County s net financial position due to capital spending. Many existing water meters were replaced with newer technology during the year. The new radio read meters allow the meters to be read more quickly and efficiently and will save money over the long term as fewer personnel are need to perform the function. Financial Analysis of the Government s Funds As noted earlier, Caldwell County uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds. The focus of Caldwell County s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing Caldwell County s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, Caldwell County s governmental funds reported combined ending fund balances of $19,959,436, a decrease of $4,269,238 in comparison with the prior year. This decrease reflects the construction of a new middle school. During the fiscal year ended June 30, 2016, $1,748,240 was spent on the construction of the new middle school. The General Fund also used $2,160,564. The County raised its property tax rate by three cents to a new rate of 63 cents per hundred dollars of valuation. This tax increase should be sufficient to prevent the continued use of fund balance by the General Fund. Approximately 18% of this total amount, or $3,498,258, constitutes unassigned fund balance, which is available for spending at the government s discretion. The General Fund is the chief operating fund of Caldwell County. At the end of the current fiscal year, unassigned fund balance of the General Fund was $3,498,350, while total fund balance reached $13,427,606. The County s fund balance available, using the calculation method suggested by the Local Government Commission of North Carolina, equaled $9,195,842, or 12.21%, of expenditures. The total fund balance of Caldwell County s General Fund decreased by $2,160,564 during the current fiscal year. The General Fund has experienced increased operational costs over the past few years with a large portion of this related to new staff and equipment for the ambulance service. The tax rate was increased by three cents for fiscal year With the tax increase, the General Fund is projected to break even in the upcoming fiscal year and use no fund balance. The County s Sales Tax Reinvestment Fund is a major special revenue fund set up to promote economic development within the county. The various municipalities located within the county have contributed a portion of their sales tax revenues to this fund. The fund offers job creation based incentives to companies who create jobs within the County and maintain them for one year. In addition, various economic development related grant funds flow through this fund. 9

33 The County s Public Schools Capital Project Fund is a major capital project fund that includes the building of the new William Lenoir Middle School. The County funded this project by issuing installment purchase debt in the amount of $14,500,000 during a prior fiscal year. During the year ended June 30, 2016, the final portions of the construction for this new school was completed. The new school opened for students in August of 2015 in time for the start of the new school year. Proprietary Funds. Caldwell County s propriety funds provide the same type of information found in government-wide financial statements, but in more detail. Unrestricted net position of the Water Fund at the end of the fiscal year amounted to $6,706,120. The total decrease in net position for the Water Fund was $74,923. Other factors concerning the finances of this fund have already been addressed in the discussion of Caldwell County s business-type activities. General Fund Budgetary Highlights Differences between the original budget and the final amended budget reflected an increase in appropriation of $900,518. The major changes can be briefly summarized as follows: Fund balance in the amount of $891,942 was appropriated during the fiscal year. This was done for a number of reasons including the purchase of an additional new ambulance, replacement of the HVAC systems at both the library and county office buildings and to cover the costs associated with recycling televisions. The General Fund s revenues exceeded its budget by $2,349,624. The major factors in this include: o Budgeting property tax collections conservatively and exceeding the budget by $772,695. o Budgeting vehicle tax collections conservatively and exceeding the budget by $284,618. o Sales tax revenue growth was greater than anticipated and resulted in exceeding the budget by $467,693. o Collection of delinquent property taxes also exceeded budget. o Host fees, revenue generated by the landfill also exceeded budget. The General Fund did not spend all of the funds appropriated. A savings of $3,505,796 was experienced. The major factors in this include: o Funds budgeted for salary and fringes were not all used. These funds are budgeted assuming all positions are filled for the entire year but every year some positions go unfilled for portions of the year. This generated roughly $1.2 million in savings. o The county jail experienced almost half a million in savings verses its budget due to a reduction in the number of inmates. The inmate population has declined significantly compared to prior years. o Various contingency funds are built into the budget and most of those funds were not spent. Other Major Funds Highlights The Sales Tax Reinvestment Fund s primary function is to support economic development within Caldwell County. The fund balance in this fund increased during the year as not all of its revenues were spent. Spending is variable and based on the number of projects active each year. The Schools Capital Project Fund contained the ongoing construction of the new William Lenoir Middle School. The fund balance in this fund was reduced during the year as a result of completing the project. 10

34 Capital Asset and Debt Administration Capital Assets. Caldwell County s investment in capital assets for its governmental and business-type activities as of June 30, 2016 amounts to $39,574,256. This investment in capital assets includes land, buildings and systems, improvements, machinery, and equipment. The following major projects represent the accomplishments of the elected leadership during this year: Construction completed on a new middle school. The new school was funded by a borrowing of $14.5 million. The school opened in August of 2015 and was available for the start of the school year. This new facility is a massive upgrade on the old facility and provides many new opportunities for students. The County continued to upgrade its fleet of ambulances during the fiscal year. Most of the front line units are now new, and many of the older units have been sold for surplus during the fiscal year. The County s tax rate remained unchanged at 60 cents per $100 of tax value during fiscal year but increased by three cents to a new rate of 63 cents for fiscal year The tax increase was necessary to prevent the General Fund from using fund balance for operations. Operational costs have increases over the past couple of years, primarily related to the ambulance service. The ambulance service changed its shift schedule so that staff work a 24/72 schedule rather than a 24/48 schedule. This means that employee will work a 24 hour shift and then be off for 72 hours before working another 24-hour shift. This allows staff more recovery time and should increase the effectiveness of employees when they are on duty. To accomplish this change new staff had to be added at a significant cost. Table 3 Capital Assets, Net of Depreciation As of June 30, 2016 Governmental Activities Business-Type Activities Total Primary Government June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015 Land $ 7,347,526 $ 7,311,425 $ 20,000 $ 20,000 $ 7,367,526 $ 7,331,425 Construction in progress 622,450-51,392 9, ,842 9,500 Buildings 18,519,865 19,225,647 92,186 95,022 18,612,051 19,320,669 Equipment, furniture, and vehicles 7,453,239 6,987, ,453,239 6,987,321 Water system - - 5,467,598 5,803,602 5,467,598 5,803,602 Total capital assets, net of depreciation, where applicable $ 33,943,080 $ 33,524,393 $ 5,631,176 $ 5,928,124 $ 39,574,256 $ 39,452,517 Additional information on Caldwell County s capital assets can be found in Note 2 beginning on page 41 of this report. 11

35 Long-Term Debt. At the end of the current fiscal year, Caldwell County had total bonded debt outstanding of $500,000. The County currently does not have outstanding revenue bonds. Table 4 General Obligation Bonds Outstanding As of June 30, 2016 and 2015 General obligation bonds Governmental Activities Business-Type Activities Total Primary Government June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015 $ 500,000 $ 825,000 $ - $ - $ 500,000 $ 825,000 Caldwell County s general obligation debt decreased during the year by $325,000. This was the result of annual principal payments reducing our outstanding debt. State statutes limit the amount of general obligation debt a governmental entity may issue to 8% of its total assessed valuation. The current debt limitation for Caldwell County is approximately $489,020,000, which is significantly in excess of Caldwell County s outstanding general obligation debt. Additional information on Caldwell County s long-term debt can be found in Note 2 beginning on page 59 of this report. Economic Factors and Next Year s Budgets and Rates Caldwell County continues to maintain a sound financial condition despite the current economic downturn. Caldwell County s fund balance percentage, as calculated by the Local Government Commission, is 12.21% as of June 30, This is well above the recommended minimum of 8%. Despite the effects of the recession, the County s financial position remains strong. Property and sales tax collections exceeded budget for fiscal year Actual expenditures in the General Fund came in almost $3.5 million below the budget. The budget for fiscal year includes a tax rate of 63 cents per $100 of tax value. This is an increase of 3 cents to the tax rate used in fiscal year The budget for fiscal year includes a substantial fund balance appropriation in the General Fund, but we do not anticipate using any of it. The County typically budgets its expenditures at 100% but only spends at 95%. Lapsed salaries and other unspent funds typically generate substantial savings. The County also attempts to be conservative in its revenue estimates and often will collect more than the budget includes. Requests for Information This financial report is designed to provide a general overview of Caldwell County s finances for all those with an interest in the government s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Finance Director, Caldwell County, P.O. Box 2200, Lenoir, NC